Non-Food Sales in Supermarkets Market Assessment 2006
Released on = April 16, 2007, 3:53 am
Press Release Author = Bharat Book Bureau
Industry = Marketing
Press Release Summary = Executive Summary
The multiple grocery chains have carried non-food basics, such as toiletries, disposable paper products and cleaning items, since first opening in the 1950s.
Press Release Body = Non-Food Sales in Supermarkets Market Assessment 2006
Executive Summary
The multiple grocery chains have carried non-food basics, such as toiletries, disposable paper products and cleaning items, since first opening in the 1950s. However, the move to larger, out-of-town sites in the 1980s gave many supermarkets the additional space required for extending their non-food offering - with ASDA, in particular, focusing on non-food, not least because its stores are generally much bigger than those of its competitors. Profit margins on non-food items are higher than on food products, and the non-food offering is a method of differentiating one chain from another in a way that is not always possible with food products. Some of the non-food brands, such as ASDA\'s George clothing brand, have been phenomenally successful. In ASDA\'s case, this has helped the chain\'s clothing sales to outstrip those of Marks & Spencer. Buying in bulk, supermarkets can squeeze suppliers\' prices and sell discounted goods. They can also `cherry pick\' lines, taking advantage of the time and investment that manufacturers and specialist traders have put into knowing their markets and varying products on offer according to the season. The development of online shopping facilities has also enabled the likes of Tesco to deliver items such as large electrical appliances, music, books and gardening equipment direct from manufacturers and warehouses. In addition to selling non-food items, the supermarkets are also selling services and utilities, capitalising on their trusted brands, and forging partnerships with other companies.
It is somewhat ironic that accusations of dubious farming practices, excessive `food miles\' and squeezing suppliers on price have convinced many people to shop for food from local specialists and farmers\' markets, yet these same supermarkets are increasing their share of non-food retail markets such as clothing and health and beauty. In fact, so successful have they been in encroaching on specialists\' markets that they are coming into considerable criticism. An All-Party Parliamentary Group for Small Shops has said that independent grocers, newsagents and off-licences will not survive the ruthless discounting from Tesco, ASDA and the other big chains. The report (High Street Britain 2015) was published in February 2006 as the Office of Fair Trading (OFT) considered whether to refer the UK\'s supermarkets to the Competition Commission for a full-scale investigation. The report warns that, by 2015, Britain could be covered with `clone towns\', with large retailers lining high streets and high streets in some areas becoming totally devoid of shops. The Group points out that such a demise will have a potentially devastating effect on the health of the population\'s lowest earners and the elderly. The report also voices the suspicion that the grocery multiples will put their prices up once the independents have been eradicated from the high street. Predictably, Tesco disagreed with the All-Party Parliamentary Group\'s view that small shops were in terminal decline, saying that people used supermarkets and small shops at different times. The Government has dismissed calls for the appointment of a retail regulator.
The new Chief Executive of the OFT, John Fingleton, reversed an earlier decision not to hold an inquiry into the dominance of supermarket groups as requested by the All-Party Small Shops Group (APSSG). In an opening statement to the APSSG in November 2005, Mr Fingleton said:
\"We do not and will not hesitate to take action under competition legislation when it is warranted. Let me stress that this legislation is to protect competition, not competitors. Difficulty for individual or groups of competitors does not necessarily equal damage to competition or mean consumers are worse off. In many scenarios, consumers benefit from increased productivity and efficiency in terms of choice, wider availability, greater innovation and lower prices. The reality is that in competitive markets there are winners and losers, as a result of consumers voting with their feet and their wallets and exercising their freedom of choice. It is not the role of the competition authorities to protect businesses that do not respond effectively to the demands of consumers, or more generally to protect less efficient or less competitive business from the rigours of the market.\"
Opposition to the large supermarket chains is so fierce in some quarters that an alliance has been formed on the Internet to co-ordinate resistance to their advance. Tescopoly Alliance aims to organise cohesive local campaigns to fight new supermarket developments, claiming that Tesco\'s success is partly based on trading practices that are having serious consequences for suppliers, farmers, overseas workers, local shops and the environment.
Many, then, will welcome the OFT\'s decision in March 2006 to refer the position of the grocery multiples in the retail sector to the Competition Commission. The OFT expressed concern at the way supermarkets sell nearly 3,000 popular products at below cost price and use local price cuts and promotions to put pressure on smaller competitors. It is also concerned at the way the supermarkets use their increasing buyer power in deals with suppliers, and their acquisition of hundreds of development sites, many of which may have been acquired solely to prevent a rival opening a store. The OFT also said that there was evidence that the big supermarket chains had erected barriers to keep out new players and that their move into convenience stores could distort competition and harm consumers. The results of the inquiry, which could take up to 2 years, will be awaited with interest. They will also be politically sensitive, since the Government will not welcome any action that could result in higher food prices and contribute to inflation.
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